I'm a private money manager and freelance writer focused on Peak Oil and Climate Change as investment themes. I manage portfolios for individual clients and am co-manager of the JPS Green Economy Fund, a hedge fund open to accredited investors looking for exposure to Peak Oil and Climate related themes. I no longer write for Forbes, but I'm Editor at AltEnergyStocks.com, where I've been analyzing clean energy stocks since 2007. I live in Upstate New York, and am a runner and a woodworker. Since I write for several sites, you can follow me on Twitter, where I tweet new articles and links to other things that catch my eye on the web. DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results. This blog contains the current opinions of the author and such opinions are subject to change without notice. Blog entries are distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

On September 17th, the Chinese Ministry of Finance announced the long anticipated renewal of China’s New Energy Vehicle (i.e. electric vehicle or EV) subsidies. The new subsidies for cars were in-line with market expectations, but will be reduced to 10% below the current levels next year, and 20% below the current levels in 2015. Subsidies for buses fell short of expectations.

Conventional gasoline-electric hybrid models were not included in the subsidies, but some plug-in hybrid (PHEV) were. The subsidies amount to 60,000 ($9,802) yuan for pure electric autos with a range over 250 km (155 miles), and 50,000 yuan ($8,168) and 35,000 yuan ($5,718) for EVs with range over 150 km (93 mi) and 80 km (50 mi), respectively. A restriction on the subsidy for low-speed electric vehicles was removed.

Electric and Plug-in hybrid electric buses also received subsidies, depending on length. For buses over 50 m in length, EVs will receive 500,000 yuan ($81,680), and PHEVs will receive 250,000 yuan ($40,840.) shorter PHEV buses do not receive a subsidy, by EV buses over 8 m and 6 m will receive 400,000 and 300,000 yuan respectively.

Stock Winners

The big winners here seem to be manufacturers of Chinese low-speed electric vehicles, among which are Kandi Technologies (NASD:KNDI note:I am long this stock) and its joint-venture partner Geely Automotive (OTC:GELYY.) Several other Chinese manufacturers of low speed electric vehicles such as Chery Automotive, Shandong Shifeng Group, and Hebei Yu Jie Ma may benefit as well.

Losers

Makers of high-performance electric cars like Tesla Motors (NASD:TSLA) will benefit relatively less because, unlike in the US, the subsidies are based only on a vehicle’s range, not on the size of its battery pack. This should not significantly effect Tesla’s prospects, however, since the company only recently started selling cars in China.

BYD Co (OTC:BYDDF Note: A hedge fund I co-manage is long BYD) has been falling, because, while it makes EVs, it also makes PHEVs, which received a lower than expected incentive.

Neither Winner Nor Loser

Surprisingly, Maxwell Technologies (NASD:MXWL Note: I am short MXWL) has been rallying. Yesterday, I assumed the rally was triggered by rumors that these subsidies included a subsidy for Chinese hybrid buses, which often account for over 50% of Maxwell’s revenue. I found comments to that effect on the message boards, including a mis-identification of the plug-in hybrid subsidy as a hybrid bus subsidy. Today, it appears that it was triggered by a Piper Jaffray upgrade, a reversal of their downgrade in March following the resignation of Maxwell’s auditor. I have not yet seen the research note, but it cannot be based on the Chinese subsidies, given that these do not include Maxwell’s customers.

I confirmed this with Mike Sund, Maxwell’s head of investor relations yesterday. He told me that this subsidy announcement does not include subsidies for Maxwell’s hybrid bus customers. Those customers expect a separate subsidy package later this month to include hybrid buses, which is what the company has been saying all along.

Maxwell’s rally is even more surprising if we assume that the lower-than expected subsidies for PHEV buses and hybrid cars are an indicator of what the hybrid bus subsidies may be like.

UPDATE: Piper Jaffray reversed their upgrade today saying they had mis-interpreted the subsidies. According to the fly on the wall:

This morning Piper Jaffray upgraded shares of of Maxwell to Overweight based on misinterpretation of data on China’s new hybrid bus subsidy, and failed to note it was only for plug-in hybrids, which the company has immaterial exposure too. The analyst has changed its rating and price target back to Neutral and $8.

This makes the large upgrade unsurprising, since the subsidies for PHEV buses are much larger than anyone expects for hybrids (which are much less expensive than PHEVs.)

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50000 this year for KNDI in H2 2013 and Q1 2014, looking forward to the 45000/vehicle and 40000/vehicle this year! direct payment of subsidies to manufacturer… what’s not to like :) thank you chinese taxpayer